Final answer:
The current yield of a bond can be found by dividing the annual coupon payment by the bond's current market price, but the exact value cannot be given here as the market price is not provided in the question. A clue is that the YTM is less than the coupon rate, hinting at a bond premium situation.
Step-by-step explanation:
The current yield of the bond today is calculated by taking the annual coupon payment and dividing it by the current market price of the bond. To find the annual coupon payment, you simply multiply the coupon rate by the par value of the bond. Since the bond pays semi-annual coupons, you would first divide the coupon rate in half to find the semi-annual coupon rate, and then multiply it by the par value to get the semi-annual coupon payment. Finally, you multiply the semi-annual coupon payment by 2 to get the annual coupon payment.
With a coupon rate of 12.2% and a par value of $1000, the annual coupon payment is $122. The current yield is found by dividing this coupon payment by the bond's current market price. Unfortunately, the current market price is not provided in the question, so we cannot calculate the exact current yield. However, we know that the yield to maturity (YTM) is 9.70%, which is lower than the coupon rate, implying that the bond is selling at a premium (a price above $1000). Since the current yield is between the coupon rate and the YTM when the bond is selling at a premium, it must be lower than the coupon rate of 12.2%.